STAGECOACH has flagged the impact of economic weakness in areas including north-east Scotland on revenues in its UK bus business.

The Perth-based group reported that revenues in its UK bus operations outside London were, in the 44 weeks to March 4, down by 1.7 per cent on the same period of its prior financial year on a like-for-like basis.

Stagecoach meanwhile unveiled improved year-on-year growth in revenues in its UK rail business.

And the company said its expectations for underlying earnings per share for its financial year to April 29 had not changed since it announced interim results in December.

It is expected by the City to post adjusted pre-tax profits of £170m for the year to April 29, down from £187.4m in the prior 12 months, based on forecasts ahead of yesterday’s trading update. The company’s earnings per share are forecast to come in at 24.5p, down from 27.7p in the previous financial year.

Stagecoach’s shares rose by 8.4p or 4.2 per cent to 207.7p, as the City welcomed its trading update.

The 1.7 per cent drop in like-for-like UK bus revenues, outside London, was not quite as steep as the corresponding 2.1 per cent year-on-year fall in the six months to October 29, 2016.

Stagecoach said the drop in bus revenues in the 44 weeks to March 4 was “largely as a result of weak underlying local economic conditions in some parts of the UK, and sustained lower fuel prices”.

It is believed that local economic conditions have, in general, been more challenging in Scotland and the north of England than further south.

A Stagecoach spokesman said: “In the north-east of Scotland, what has been happening with the oil and gas industry and the economy around Aberdeen, and the wider north-east, clearly is one factor affecting bus use in that area.”

The company declared that it remained positive about the longer-term opportunities for its UK bus division, flagging a digital investment programme including the expansion of contactless payments.

Revenues in Stagecoach’s London bus operations were, in the 44 weeks to March 4, down by 0.9 per cent on the same period of the prior financial year on a like-for-like basis.

Stagecoach reported that its UK rail division’s revenues in the 44-week period were up by 1.6 per year-on-year on a like-for-like basis. This signals an acceleration of revenue growth in this key division.

In the six months to October 29, Stagecoach’s UK rail division revenues were up by 0.8 per cent on a year earlier.

This division includes East Midlands Trains, South West Trains, and the East Coast Main Line franchise. The East Coast operation is run by a joint venture, in which Stagecoach has a 90 per cent stake and Sir Richard Branson’s Virgin Group holds the remaining 10 per cent.

Stagecoach said: “UK rail industry revenue growth has slowed over the last 18 months. Although there has been improvement in our growth rates, they remain low by historical standards.”

The group noted revenue growth in its inter-city rail operations continued to outperform that in its London commuter business.

It emerged this week that Stagecoach had been unsuccessful in its bid to retain the South West Trains operation, with Aberdeen-based rival FirstGroup winning a head-to-head battle for the new, seven-year franchise to run this network.

This represents a key victory for FirstGroup in its campaign to build its train operations, following its loss of the ScotRail franchise to Abellio.

FirstGroup holds 70 per cent of the joint venture with Hong Kong-listed MTR Corporation that was named this week by the Department for Transport as the winner of the competition to run the new South Western rail franchise.

Stagecoach, which will run the existing franchise until August 19, said on Monday that it was “disappointed” it had been unsuccessful in its bid.

The company reports the performance of Virgin Rail Group, which runs the West Coast Main Line franchise, separately from its other passenger train operations. Revenues at Virgin Rail, in which Stagecoach has a 49 per cent stake and Virgin Group has a 51 per cent holding, were in the 44 weeks to March 4 up by 5.3 per cent on the same period of the prior financial year.

Stagecoach noted revenues for the West Coast franchise in the second half of the previous financial year had been affected adversely by the temporary closure of the Lamington viaduct in southern Scotland.

Revenues at Stagecoach’s North American transport businesses in the 10 months to February 28 were down by 2.2 per cent on the same period of the prior financial year on a like-for-like basis.

Stagecoach noted that, while revenues at its megabus.com inter-city coach business in North America were 5.4 per cent lower, revenue per vehicle mile was up 2.8 per cent because of cost-cutting.